This brief summary of the decision, delivered on 30 August 2017, will be of interest to anyone entering into derivative transactions involving Russian counterparties.
For details regarding the first instance decision, please see here.
On 30 August 2017, the 9th Arbitrazh Appellate Court published its decision from 23 August 2017, reversing the decision of the Moscow Arbitrazh Court, and dismissed the lawsuit entirely.
Arguments of the court:
The court put forward the following reasons:
The court decided that, given the size of Transneft’s business and its frequent involvement in FX derivative markets, Transneft was a sophisticated counterparty and therefore did not require extensive guidance from Sberbank.
The court further concluded that Sberbank did not act in bad faith and disclosed all material risks to Transneft, which Transneft independently reassessed.
Financial institutions offering derivative products to Russian counterparties will find this appeal decision very helpful because it: (1) reaffirms the practice of expecting sophisticated counterparties to assess the risks relating to any complex financial transactions themselves and (2) will deter such counterparties from attempting to avoid the consequences of making a bad bargain by pleading lack of required knowledge.
It remains to be seen whether this decision is final or whether it will be appealed to the Supreme Arbitrazh Court of the Russian Federation.